Quebec moves on shale-gas ban

MONTREAL/CALGARY — Less than 24 hours after being sworn in, Quebec’s new natural resources minister has shut the door nearly definitively on shale gas exploration and commercialization in the province.

“I do not see the day when there will be technologies allowing the safe extraction of [shale natural gas],” said Martine Ouellet, a Hydro-Québec engineer named to lead the natural resources ministry by Parti Québécois Premier Pauline Marois.

Environmental groups cheered. The PQ’s political rivals cringed. Industry called it a short-sighted and premature position that ignores the fact shale gas is being tapped elsewhere every day without incident.

The declaration will have little short-term impact. Quebec has a de-factor moratorium in place already on shale gas activity while a special committee working on a strategic environmental evaluation of the resource runs its course.

The mandate of that committee is now expected to be expanded and transfered to another body, the Bureau d’audiences publiques sur l’environnement. But the outcome of that effort won’t matter if the minister sticks to her views.

“The dialogue ought to have continued before they made their final conclusions,” said Barry Munro, a corporate finance specialist who leads the Canadian oil and gas practice for Ernst & Young in Calgary. “I don’t really understand why any individual jurisdiction would want to move to that position without doing a thoughtful and thorough analysis.”

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North American prices for natural gas remain at near 10-year lows, meaning there is little incentive by producers to quickly develop gas plays such as Quebec’s promising Utica formation in the Saint Lawrence Lowlands.

Ms. Ouellet’s statement is significant because it lays bare the new PQ government’s way of thinking about resources while stoking a further rift between have and have-not provinces. A growing number of people are questioning the fairness of provinces refusing to develop natural resources and then benefitting from equalization payments. Quebec is a net beneficiary of equalization, receiving $7.6-billion in 2011-2012.

“It is within the freedom of the Quebec government to decide that they’re not going to exploit certain resources they could exploit safely,” said Michel-Kelly Gagnon, president of the Montreal Economic Institute, a free-market think-tank. “But if they decide not to, the taxpayers of Alberta and of other provinces shouldn’t have to pay for that.”

Mr. Kelly-Gagnon likened the situation to a welfare recipient who says he doesn’t want to work even if he is able, arguing the taxpayer should be free to withhold financial assistance to him.

The PQ’s entry into power represents a fundamental shift in the way the government approaches fossil fuels, one that reframes the previous Liberal government’s urgency to develop oil and gas for the benefit of Quebec’s revenue-challenged economy into a more cautious and consensus-building insistence that environmental concerns are paramount.

Gone are the Liberal government’s pro-business ministers such as Raymond Bachand, Pierre Arcand and Clément Cignac. The PQ’s economic team is decidedly more green-leaning. Ms. Ouellet is the former head of Quebec water-conservation group Eau Secours! Daniel Breton, minister of sustainable development and the environment, is a co-founder of Quebec’s Green Party.

Debate over shale gas drilling, done through a process of hydraulic fracturing that blasts water and chemicals into rock to allow the gas’s release, has been deeply divisive in Quebec. Proponents argue that approving commercialization would unlock an estimated $232-million in revenue for the Quebec government over the first five years alone and create thousands of jobs. Opponents note that much of the drilling will take place on a region of productive farmland and picturesque countryside. They charge the risk that it will be ruined is too great.

“I have no doubt that a strategic resource like [shale gas] will be developed once the Quebec government is in a position where it can convince its population that it can regulate it safely,” said Michael Binnion, chief executive of Calgary-based Questerre Energy Corp., which has participated in 16 of the 31 shale gas wells drilled in the province.

“Will it happen by early 2014 as we had hoped? It feels less likely today than it did two days ago.”

“The minister’s statements were courageous and clear,” said André Belisle, president of the AQLPA, an anti-pollution group, noting the minister visited Pennsylvania on two separate occasions to get a first-hand account of that state’s experience with shale gas development. “What we saw there was definitely horror,” Mr. Belisle said.

François Legault, leader of the opposition Coalition Avenir du Québec, said Ms. Ouellet shouldn’t be “so dogmatic” about shale gas before the environmental committee’s final studies have been completed. “If the technology allows the extraction safely, we should exploit shale gas.”

Quebec sustainable development commissioner Jean Cinq-Mars, a Quebec government watchdog, concluded last year that the former Charest government gave industry the green light for exploration without consultation or thorough analysis about whether it would actually be profitable for Quebec.